Is Money Driving You Mad?

We like to think we control money, because it seems so easy to control. Money is simple. Money obeys.

But as we've all learned recently, we do not control money. In fact, money can relieve us of even our most deeply held principles with the bored ease of an usher taking a ticket. Everyone is vulnerable to its corrupting influence: In one University of North Carolina study, simply looking at cash led people to overstate their performance on a word test.

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Money, in other words, is not unlike a foxy blonde: A mere glimpse makes us act like fools. We do it over and over again—falling into debt, buying useless crap, churning our investments. Studies show that once we meet our basic needs, making more money won't make us happier, yet we keep panting after it. (And we keep spending it—especially spending what we don't have. Here's how to Stop Being a Credit Card Zombie.)

It's time to stop underestimating the power of money. The real question is: What is the nature of that power, and how can we take it back?

Money Is a DrugBut you can make it work for you

The year was 2006, and for Stephen Lea, PH.D., a professor of psychology at the University of Exeter, the standard theory of money—that it's simply a tool we use to obtain what we want—was no longer making sense. Too many anomalies existed that the theory couldn't explain. Why, for instance, did the allure of money so far exceed its evolutionary advantage? Why did we act as if having money was an end in itself, when its only real value came from exchange? And why was money always blinding us to our own best interests?

Suddenly Lea remembered an old experiment from his training days, conducted by a scientist named Schwab. He first asked people to hang from a pullup bar as long as they could. Next they received the same instruction, along with verbal encouragement. The third time, they received no encouragement; instead, they were shown and promised a $5 bill to hang on longer than on their previous two tries. But on that third attempt, the people lasted about twice as long as they had in the first, and 50 percent longer than during the second. What could explain this difference in performance?

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That's when Lea began to wonder: What if money is a drug? Consider the evidence. The thought of money lights up the brain's reward centers, as any snortable substance might. Scientists have known this for a while. Money also actually changes the way we think. In studies from the University of Minnesota, researchers found that just seeing a picture of money jerked our brains into Wall Street mode, ramping up our math memory and priming us to keep our eyes on the prize. In fact, on a sluggish morning, the sight of a crisp fifty can be as motivating as a blast of caffeine. In a 2006 experiment, for example, people reminded of money worked 70 percent longer at an assigned task than a control group did. And a follow-up study found that the effect extends to the social sphere, boosting our confidence and immunizing us against the pain of rejection. Prime the productivity pump: Look at some cashWith the economy rebuilding, now is the time to take full advantage of your hardwired reaction to money. Just seasoning your office with reminders of money—or "money primes," as researchers put it—can help switch your brain into work mode and lead to better performance in the workplace, says Kathleen Vohs, Ph.D., the mastermind behind much of the research in this area. You might consider a money-themed screen saver, for instance. Or just ask an assistant to swing by every 15 minutes and whisper the word "money" in your ear. Money primes can be especially useful for those of us who are, by nature, too agreeable for our own good. Call it the "lackey syndrome": Studies show that overly agreeable men earn dramatically less, on average, than men who are more willing to risk the displeasure of others. Money primes, research suggests, may offer a potent defense against lackey syndrome, by cuing you to stand up for yourself instead. (Even in the tough economy, you can succeed. Here are more tips to Build Wealth in Troubled Times.)An Addiction to Cash Can Make You CrazyIf you don't go easy, your obsession may lock you out of your own life

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The thrill of money does have side effects. Addiction, for instance. The firm belief that you need to make just $50,000 more, $500,000 more. Five million more. In a 2007 essay, Manfred Kets de Vries, D.B.A., a professor of leadership development at the business school INSEAD, has an eloquent name for this: "fuck-you money." It's the amount you think you need to never depend on anyone ever again. Ever. In this economy, who wouldn't want some of that? But Kets de Vries also writes, "the quest for wealth doesn't make for the kind of security and peace of mind that most people imagine." Consider: For all the studies showing how money motivates and builds confidence, other studies find that it deadens charitable impulses, impairs social skills, and makes you less likable. Upshot? The unchecked pursuit of money can freeze you out of your own life. In one University of Minnesota study, participants reminded of money were three times more likely to prefer working alone over working with others. The same study showed that in a social setting, the mere thought of money made them position their chairs roughly 12 more inches apart. Just thinking of money made other human beings 12 inches less tolerable.

Focus on timeDon't be that guy. You know: ambitious but unbalanced. Gangbuster career but headed for a breakdown. So how do you outwit money's allure and keep your career on track? One hint comes from a 2010 University of Pennsylvania study, which found that when people switched their attention from money to time, they tended to pursue goals more aligned with long-term happiness, such as hanging out with family and friends. "Focusing on the scarcity of a resource leads us to make the most of it," says Philip Cozzolino, Ph.D., a social psychologist at the University of Essex. The key is knowing how to switch focus. "That's becoming harder with all of the technologies that constantly keep us connected to work," says Cassie Mogilner, Ph.D., the study author.

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So optimize transitional periods: If you listen to a money show on your way to work, listen to music on the way home. For those who bill by the hour, the challenge can be greater. "They become so accustomed to placing a monetary value on their time at work," says Mogilner, "that when no corresponding monetary value exists—like when they're having dinner with family—they tend to dismiss the experience as valueless." This info may help: One study estimated that simply switching from seeing family and friends less than once a month to seeing them most days is worth $135,000.

It's Not the Mercedes—It's the RoadHere's something the rich know better: Experiences have more value

Whatever money's subtleties, you can at least rest assured that the products you buy with it are more or less worth the price. After all, this is money's job—to tell us what stuff is worth. Right?

Well, no. Money often bungles even this simple task. For instance, studies show that the owners of luxury cars are generally no happier driving them than the owners of compacts, and that owning a vacation home has no impact on happiness. "This process of hedonic adaptation sets in. We start taking for granted almost any change in our lives," says Sonja Lyubomirsky, Ph.D., a professor of psychology at the University of California at Riverside. When it comes to satisfaction, she says, you'd do far better buying an experience. "We are the sum total of our experiences," Lyubomirsky says. "People don't define themselves so much in terms of their possessions." One University of Texas study found that compared with material purchases, experiential purchases made materialists just as happy. (Start here: The 20 Guy Trips That Will Change Your Life.)

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Score the benefit, not the thingInstead of purchasing the Mercedes or the Porsche, rent one for a weekend—and drive it hard. Better yet, skip the Porsche and take your nephew to the go-kart track and shred the asphalt all day long for a fraction of the cost. As for the vacation home—well, it may be fun to think about, but that's because you're not dealing with the flooded basement, the noisy neighbors, and the monthly payments. As with the Porsche, you're better off renting—not least because you can vacation somewhere new every year and put the money you saved toward, say, guitar lessons. Or perhaps a class in Italian and two tickets to Italy. You might try Puglia, the heel of the boot, where you can still spend a few weeks sipping Primitivo on the Adriatic for the price of some designer shirts. But whatever you do: Don't buy a boat!

Savoring Is KeyTo boost satisfaction, shun snobbery

While it's generally true that a nice car won't make you happy, there is one exception: when you're actually thinking about the car. The same is true of any decent bottle of wine: Savoring it will bring you more pleasure. But even images of wealth seem to impair savoring. In one 2010 study, people exposed to a picture of money spent 30 percent less time eating a piece of chocolate. In an accompanying analysis, researchers also concluded that wealthier people were less able to enjoy life's little pleasures.

In other words, they'd become snobs.

To win back your happiness, learn how to savor again. Tom Meyvis, Ph.D., an associate professor of marketing at New York University, found some hints about how in a 2008 study designed to examine the effect of interruptions on pleasurable experiences. Participants were asked whether they preferred a massage with interruptions or without; most of them (73 percent) said without. Yet those who then received an interrupted massage valued it twice as much. Insight dawned: The secret to savoring is breaking pleasurable experiences into smaller chunks. "You reduce adaptation and increase sensitivity," Meyvis says.

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The interruption principle has broad implications. "I'd also suggest that instead of buying one big thing, make little purchases over time to repeat that initial enjoyment effect," says Meyvis. Ultimately, savoring is a cognitive tool that's as important as positive thinking or goal setting. It's how you transform products into experiences: anticipating them, engaging them, making them memorable. And insulating them from the numbing effects of money.

Play hard to getIf you're not buying experiences, at least spend your money on stuff that can easily convert into experiences. Choose things you can interact with, or things that lead to interaction with others. Food is always a good bet for this reason. If you must have a fancy cooking toy, spend your money on bricks and build a pizza oven in your yard. You'll remember the experience and enjoy reconnecting with old friends. Also, stick to smaller portions of high-quality goods. "The bigger your portions," says Meyvis, "the more you consume, the greater your adaptation, and the less you'll savor." Then learn to enjoy the humble purchases. Don't let your taste for fine wine prevent you from relishing a cold can of Miller on a hot day. If all else fails, reset. "We call it 'revirginizing,'" says Jordi Quoidbach, Ph.D., the lead author of the chocolate study. Depriving yourself of day-to-day pleasures restores your ability to enjoy them. Go camping, or swear off coffee for a week—and then blow your mind on a double espresso at home.

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You Can't Buy HappinessScore a little for someone else—it'll rub off

You work hard for your money. So it would be natural to assume that you'd get the most pleasure from spending it on the person who deserves it most: you. But guess what? This, too, turns out to be wrong. In a 2008 study from the University of British Columbia, students given money to spend on others reported greater happiness than students instructed to spend the same amount on themselves. Researchers also found that while spending more money on charity or gifts predicted higher levels of happiness, students who spent more on themselves were not happier. (Who deserves your hard-earned cash? Click here for The Manliest Charities in America.)

When you take a closer look at the research, you can see why. Most of the students in the study who spent on themselves used the money to grab a quick bite, while students who spent on others made more impactful choices. "They often bought lunch for someone else," says Lara Aknin, Ph.D(c)., one of the study's coauthors. "We had a couple of students who bought flowers for their parents. Some people bought toys for siblings. Some people decided to bring home dinner for their family."

These were all occasions, in other words, in which the value of the purchased good was compounded by novelty and social contact. "The number one predictor of happiness for people is social relationships," says Aknin. "Using our money to strengthen social relationships might be one reason we see the emotional benefits that follow."

Remember our earlier lesson: Experience is usually a better buy than stuff. And when you spend on someone else, what you're really buying is an experience—the experience of that person's happiness, and the knowledge that you are responsible for it. How do you put a price on that? Unfortunately, it's not easily done, which is part of the reason we tend to underestimate the value of spending money on others. When money is the mediator, value and price don't always match.

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Spread the WealthTimes may be tight, but that only means your largesse will be more appreciated and more valuable as a result. Birthdays, of course, are the sanctioned time to spend money on others. Or buy a round of golf for your workaholic pal. If your brother likes beer, bring him back a specialty brew from your trip to Belgium.

Of course, some rules apply. "It's okay to give money if you're moving down an age gradient, or a status gradient," says Lea. "But going the other way is a no-no. And horizontal money gifts are also rare." Most of us know this intuitively. If your friend helps you fix a gutter, a pizza payment will be cool, but handing him cash won't win points.

Feeling magnanimous? Think about taking it to the next level: pocket philanthropy. Nicole Bouchard Boles, author of How to Be an Everyday Philanthropist, suggests kiva.org, a site that lets you make microloans to entrepreneurs in the developing world. "After years of living at the mercy of big bankers," says Boles, "there's something satisfying about doing the job yourself: deciding which loans to fund." If nothing else, spending money on others can serve as a useful reminder that you control your money—not the other way around.

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